Intel’s Chief Executive Hints Growing Importance of Foundry Business for Company

While officially Intel Corp. sees its contract semiconductor business as an opportunity for the future, it looks like the company is working on its foundry project pretty hard already. Moreover, the company’s Custom Foundry division might have signed more contracts already than anyone could expect it to.

At present, Intel officially has two foundry customers – Achronix and Tabula – both are designers of advanced field-programmable gate arrays (FPGAs). The company claims that it does have other customers, but never names them. One thing that seems to be clear about those clients is that they do not compete against the chip giant.

“I would be a foundry for strategic relationships and not to enable our competitors. […] We are running a small foundry business, we are building up our capabilities and do not want to compete directly with TSMC, that is not our business model. For the right types of products and not to enable my competitors, I would certainly consider [making chips for others]. There is a lot of stuff in the pipeline,” said Paul Otellini, chief executive officer of Intel, at Sanford Bernstein technology conference earlier this week.

Apparently, Intel Custom Foundry has much more customers than anyone would think. Moreover, at least some of those customers are already manufacturing their products at other contract makers of semiconductors.

“As you know it takes a while to move your designs over, to design them under our process, for us to be able to bring them in-house and so forth and our foundry customers are not going to announce that they have moved until they have moved because it would hurt them at their current suppliers,” said Mr. Otellini.

Intel clearly understands that it is ahead of the rest of the semiconductor industry. Naturally, this kind of lead could be the best instrument on the market of contract semiconductor manufacturing.

“It makes sense for us to have that kind of capability, particularly as our semiconductor lead gets wider over the industry. That allows us to consider and take business on ‘value’ pricing model vs. the ‘cost plus’ pricing model [which it typical for the foundry industry]. I do not think that the ‘cost plus’ makes sense for us since we want to get paid for value of the transistor performance and transistors,” explained Mr. Otellini.